The Effects of Electricity Costs on Firm Re-location Decisions: Insights for the Pollution Havens Hypothesis?

The Effects of Electricity Costs on Firm Re-location Decisions: Insights for the Pollution Havens... Electricity costs are partly driven by environmental policy choices. In this paper, the effects of variations in electricity costs—as measured by end-user electricity prices–on firm relocation decisions are investigated. Using a discrete choice model and a data base that has not previously been exploited to study this problem, we investigate the effects of variations in electricity costs on the intensive and extensive re-location decisions of European firms. We find that electricity costs play a significant role in determining relocation destinations. This effect is asymmetric between firms moving into and out of a country, and between high and low energy intensity sectors. The findings of the paper have implications for the Pollution Havens Hypothesis, since they show the extent to which the effects of climate policy on domestic electricity costs can be expected to impact on firm relocation decisions both into and out of a country. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Environmental and Resource Economics Springer Journals

The Effects of Electricity Costs on Firm Re-location Decisions: Insights for the Pollution Havens Hypothesis?

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Publisher
Springer Netherlands
Copyright
Copyright © 2016 by The Author(s)
Subject
Economics; Environmental Economics; Environmental Law/Policy/Ecojustice; Political Economy/Economic Policy; Economics, general; Environmental Management
ISSN
0924-6460
eISSN
1573-1502
D.O.I.
10.1007/s10640-016-0051-1
Publisher site
See Article on Publisher Site

Abstract

Electricity costs are partly driven by environmental policy choices. In this paper, the effects of variations in electricity costs—as measured by end-user electricity prices–on firm relocation decisions are investigated. Using a discrete choice model and a data base that has not previously been exploited to study this problem, we investigate the effects of variations in electricity costs on the intensive and extensive re-location decisions of European firms. We find that electricity costs play a significant role in determining relocation destinations. This effect is asymmetric between firms moving into and out of a country, and between high and low energy intensity sectors. The findings of the paper have implications for the Pollution Havens Hypothesis, since they show the extent to which the effects of climate policy on domestic electricity costs can be expected to impact on firm relocation decisions both into and out of a country.

Journal

Environmental and Resource EconomicsSpringer Journals

Published: Aug 1, 2016

References

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